Success can be built upon repeated failures when the failures aren’t taken personally; likewise, failure can be built upon repeated successes when the successes are taken personally. (Location 94)
Note: Great quote to ponder
Personalizing successes sets people up for disastrous failure. They begin to treat the success as a personal reflection rather than the result of capitalizing on a good opportunity, being at the right place at the right time, or even being just plain lucky. (Location 199)
Listen to Herb Kelleher, CEO of Southwest Airlines: “I think the easiest way to lose success is to become convinced that you are successful.” (Location 205)
If you’re focusing on it like: “This is a game and all these clowns are doing is trying to drive me crazy,” it isn’t hard. (Location 467)
You can either play the system or you can let the system play you. Pick one. I like playing the system because it’s more fun and you win more. If you let the system play you, you can get very frustrated and very beat up. (Location 490)
That taught me that there are people for places, places for people. You can do some things and you can’t do other things. Don’t get all upset about the things you can’t do. If you can’t do something, pay someone else who can and don’t worry about it. (Location 537)
Sometimes, knowing the right people and being in the right place at the right time can make all the difference in the world. (Location 676)
The vast majority of the successes in my life were because I got lucky, not because I was particularly smart or better or different. (Location 762)
One of the oldest rules of trading is: If a market is hit with very bullish news and instead of going up, the market goes down, get out if you’re long. An unexpected and opposite reaction means there is something seriously wrong with the position. (Location 886)
The pros could all make money in contradictory ways because they all knew how to control their losses. (Location 1151)
The pros consider it their primary responsibility not to lose money. (Location 1154)
Losing money in the markets is the result of either: (1) some fault in the analysis or (2) some fault in its application. (Location 1174)
an external loss is not open to subjective, individual interpretation; it is an objective fact. On the other hand, an internal loss is defined in terms of the individual (i.e., subject) experiencing it. (Location 1270)
In other words, a loss is objective when it is the same for me, you, and anyone else. The loss is subjective when it differs from one person to another, when it is entirely a personal experience. (Location 1272)
Market losses are external, objective losses. It’s only when you internalize the loss that it becomes subjective. (Location 1287)
Participating in markets is not about being right or wrong, nor is it about defeat; it’s about making decisions. (Location 1296)
Decision making is a process of reaching a conclusion after careful consideration; it is a judgment, a choice between alternatives when all the facts are not yet, and cannot yet, be known because they depend on events unfolding in the future. (Location 1297)
They confuse net worth with self-worth. (Location 1306)
Note: Dont confuse net worth with self worth
On Death and Dying, by Elisabeth Kübler-Ross. (Location 1315)
If you can’t even, or don’t dare, sit down and calculate how much you’re losing in a position, but you know to the exact penny how much you’re making on your profitable positions, then you’re denying the loss. (Location 1326)
Think of the differences between discrete events and continuous processes this way: Would you lose more money or less money at the racetrack if they stopped the race in the middle and reopened the betting window? That is to say, if you had the opportunity to either (1) leave your bet or (2) make a second bet on another horse. You sat down before the race looked at the racing form and said, “Okay, number 4 is obviously the class horse, but he’s three to two and I’m not going to bet the favorite because there’s not enough payoff. I kind of like number 7, and he’s five to three, but 9 looks okay and he’s seven to one. I’ll go with 9.” Half way through the race who’s in front? Number 7. If they could stop the race and let you bet again, what would you do? You would say, “I knew it! I liked 7 to begin with. I should have picked 7.” You would go to the betting window and make a new bet on number 7. Who wins? Number 4. In the markets they never close the window. It’s open all the time, so you continuously get to remake that decision and constantly make new “bets.” (Location 1392)
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Betting and gambling are suitable for discrete events but not for continuous processes. If you introduce the behavioral characteristics of betting or gambling into a continuous process, you are leaving yourself open to enormous losses. (Location 1569)
“Crowds are somewhat like the sphinx of ancient fable: it is necessary to arrive at a solution to the problem offered by their psychology or resign ourselves to being devoured by them.” (Location 1702)
For instance, in Manias, Panics, and Crashes by Charles P. Kindleberger we find the Minsky Model: (1) Displacement—some exogenous event (war, crop failure, etc.) shocks the macroeconomic system. (2) Opportunities—the displacement creates profitable opportunities in some sectors of the economy and closes down other sectors. Investment and production focuses on the profitable sectors and a boom is underway. (3) Credit expansion—an expansion of credit feeds the boom. (4) Euphoria—speculation for price increases couples with investment for production/sale.2 (Location 1715)
Another common pattern used to describe the crowd overtaking a market is (1) speculation, (2) credit expansion, (3) financial distress, (4) crisis, (5) panic and crash. (Location 1720)
The basic distinction between the individual and the crowd is that the individual acts after reasoning, deliberation, and analysis; a crowd acts on feeling, emotion, and impulses. (Location 1742)
Recall from basic economics that markets exist to satisfy the wants and needs of consumers. This means people make purchases for only one of two reasons: to feel better (satisfying a want) or to solve a problem (satisfying a need). (Location 1818)
Remember, emotions per se are neither good nor bad; they just are. It’s emotionalism we are trying to avoid. (Location 1823)
Yes, there is a common factor that triggers the mental processes, behavioral characteristics, and emotions of a net loser: the uncertainty of the future. (Location 1906)
Speculating is the application of intellectual examination and systematic analysis to the problem of the uncertain future. (Location 1927)
Successful trading is also the result of successful speculation. The trader has a methodical approach to bidding and offering stock (or bonds, futures, currencies, etc.) and monitoring market conditions for any subtle changes in supply and demand. He knows only too well the perils of predicting and doesn’t try to forecast market direction. He operates under strict parameters of “if … then” statements that dictate his subsequent buy and sell decisions. (Location 1934)
Broadly speaking, the decision-making process is as follows: (1) Decide what type of participant you’re going to be, (2) select a method of analysis, (3) develop rules, (4) establish controls, and (5) formulate a plan. (Location 1958)
In the markets and in business don’t concern yourself with being right. Instead, follow your plan and watch the money. (Location 2114)
Following your plan imposes discipline over your emotions. Since discipline means not doing what your emotions would have you do, then if you don’t have the discipline to follow the plan, your emotions have taken control and you wind up in the crowd. (Location 2158)
“Weak is he who allows his actions to be controlled by his emotions, and strong is he who forces his actions to control his emotions.” If you’re not consciously doing the latter, then you’re unconsciously doing the former, (Location 2163)
Another way of looking at it is: are you long because you’re bullish or bullish because you’re long? (Location 2207)
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In his book Teaching Thinking, internationally renowned education expert Edward de Bono says, “A person will use his thinking to keep himself right. This is especially true with more able pupils whose ego has been built up over the years on the basis that they are brighter than other pupils. Thinking is no longer used as an exploration of the subject area but as an ego support device.” (Location 2210)
Remember, participating in the markets is not about egos and being right or wrong (i.e., opinions and betting), and it’s not about entertainment (i.e., excitement and gambling). Participating in the markets is about making money; it’s about decision making implemented by a plan. And if implemented properly, it’s actually quite boring waiting for your buy/sell criteria to materialize. The minute it starts getting exciting, you are gambling. (Location 2233)
The lesson here is: Taking either success or failure personally means, by definition, that your ego has become involved and you are in jeopardy of incurring losses due to psychological factors. (Location 2254)
If your estimate of your self-worth rises and falls with your successes and failures, wins and losses, profitable and unprofitable business transactions, then your self-concept will be in a constant state of crisis. (Location 2258)
A person’s self image “should not be dependent on particular successes or failures, since these are not necessarily in a man’s direct, volitional control and/or not in his exclusive control. (Location 2261)
your self-image should not be a function of what you have accomplished but how you have gone about doing it. (Location 2265)
Think of it this way: if you have a million dollars in the bank but you stole it, your self-esteem can’t be very high. If you earned it, your self-esteem is quite high. (Location 2266)
In other words, pat yourself on the back or kick yourself in the backside depending on whether you develop a plan from a method of analysis, implement the plan via rules, and then follow the rules. (Location 2268)
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the disciplined use of a plan, with the stop-loss defined first, is the only way to prevent the losses due to psychological factors. Losses will still occur due to analytical factors, but those losses are normal course-of-business-type losses. (Location 2277)
All effective plans require eliminating the losses due to psychology by defining a stop-loss first, even plans and decision making that don’t involve the markets. (Location 2281)
After you have developed your plan, start preparing your speech, so to speak, about what you’re going to do if certain conditions aren’t fulfilled by a certain time and what those conditions are. Like any good speech writer, you should start by putting pen to paper. To prevent unintentional and implicit violation of your plan, no device is more effective than setting down that plan before your eyes explicitly in black and white. This objectifies, externalizes, and depersonalizes your thinking, so you can hold yourself accountable. (Location 2325)
Your plan is structured so that you stay when your position is working and you get out when it’s not. Take the loss, and don’t worry about it. (Location 2381)
Speculating (and this includes investing and trading) is the only human endeavor in which what feels good is the right thing to do. (Location 2430)
When it comes to the markets you’re supposed to do what feels good. If you deviate from your plan and the market starts going against you, what are you going to say when I knock on your door and ask, “Well? Are you having fun? Is this an enjoyable experience?” You’re going to say, “No! This is not fun. Looking at these prices going down is not fun.” You know what you should do? Don’t go looking for supporting evidence or reasons to stay in the market. Do what feels good. (Location 2433)
Remember, you don’t get any money just because you know why the market is going up or down. You only get money if your plan has positioned you to capitalize on the market’s movement, regardless of whether you know why the market is up or down on a particular day. (Location 2515)